Major Overnight Headlines
• RBI unexpectedly boosts repo rate by 25bps to 7.50%; lowers marginal lending rate by 75bps
• Italian industrial orders slump 2.2% in July after 4.3% fall in June; domestic orders lead declines
• Riksbank Sept. monetary policy meeting minutes show consensus forming around better growth in Sweden
• UK PSNB (ex) at 13.2bln in August, down on year-ago level
• Eurosystem LTRO1/2 re-payments to total EUR7.91 bln next week
Despite some of yesterday’s directional post-Fed moves within FX, we suspect price action and tone today reflect a broader market which is thoroughly confused, and also thoroughly displeased by the lack of certainty. From a Fed perspective the only thing we can really suggest for now is to watch the US data very closely and allow Fed officials to engage in a tonne of ‘hand-holding’, which is surely what they need to do. The degree to which capital flows will commence, retrench or be put to work is dependent on whether or not we have a clear idea of what the Fed will do with policy over the next quarter, and as of today we simply don’t.
We look for any JPY weakness building on yesterday’s themes to be recurring this afternoon in some places but rather tepid at the same time in front of the weekend event risk.
Read the full report: FX Daily
BMO